ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Interim / Quarterly Report 2003

Feb 19, 2003

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD

A.B.N. 28 009 120 405 21 Teddington Road, BURSWOOD WA 6100

ASX RELEASE

20 February 2003

The Directors of Environmental Solutions International Ltd ("ESI") announced today that the Company incurred a trading loss of \$1.7 million during the half year ended 31 December 2002. The Company will not pay a half-yearly dividend to shareholders.

The primary reasons for the variance from last year's results include:

• The expenditure on marketing and commercialisation of ENERSLUDGE™. $\bullet$
• Delays in the award of the four water/wastewater contracts recently announced by ESI.
• Increased tendering costs for larger local and overseas wastewater/water projects for which the Company has bid alone or in joint venture with others.

Whilst the sewage sludge market for the ENERSLUDGE™ technology is slower to emerge than most expected the global trend away from land based disposal routes continues. The Company is examining the application of its thermal processing know-how for the treatment of other waste streams e.g. rubber tyres, plastics, organic fraction of municipal solid wastes. agri-wastes.

The half yearly result does not include contracts totalling some \$22M from tenders which the Company has been advised have been accepted. The revenue from these contracts will start to flow in the second half. The Company expects to break even in the second half but this position could improve if the Company wins its share of tenders which are outstanding, currently in excess of \$50 million. Past history would indicate that ESI should win a reasonable share of these tenders. If that occurs, next year should be a very good year for the water/wastewater division

Whilst the loss is disappointing for the Board and Shareholders, the Directors are confident the increased attention being given to water recycling in Australia and to the supply of a better quality drinking water in S E Asian countries augers well for the Company's long-term future.

For further information contact Mr Denis Glennon, ESI Managing Director on Tel: 08-9470 4004 or by email: lornaf@environ.com.au.

⁺ See chapter 19 for defined terms.

Appendix 4B

Half yearly/preliminary final report

Introduced 30/6/2002

Name of entity
ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD
ABN or equivalent company Half yearly Preliminary final $(tick)$ reference (iick)	Half year/financial year ended ('current period')
28 009 120 405		31 December 2002
For announcement to the market Extracts from this report for announcement to the market (see note 1).			SA'000
Revenues from ordinary activities (item $1.1$ )	22% up/	tο	7,794
Profit (loss) from ordinary activities after tax attributable to members (item 1.22)	/down	% tο	(1,172)
Profit (loss) from extraordinary items after tax attributable to members (item $2.5(d)$ )	gain (loss) of
Net profit (loss) for the period attributable to members $(i$ tem $1.11)$	up/down	% tο	(1,172)
Dividends (distributions)	Amount per security		Franked amount per security
Final dividend (Preliminary final report only - item 15.4) Interim dividend (Half yearly report only - item 15.6)	$NIL \epsilon$		NIL¢
Previous corresponding period (Preliminary final report- item 15.5; half yearly report - item 15.7)	0.36		NIL¢
*Record date for determining entitlements to the dividend, (in the case of a trust, distribution) (see item $15.2$ )	N/A
Brief explanation of any of the figures reported above (see Note 1) and short details of any bonus or cash issue or other item(s) of importance not previously released to the market:

If this is a half yearly report it is to be read in conjunction with the most recent annual financial report.

Rules 4.1, 4.3

$+$ See chapter 19 for defined terms.

		Current period - \$A'000	Previous corresponding period - \$A'000
1.1	Revenues from ordinary activities (see items 1.23 $-1.25$	7,794	6,381
1.2	Expenses from ordinary activities (see items 1.26 & 1.27	8,964	5,807
1.3 1.4	Borrowing costs Share of net profits (losses) of associates and joint venture entities (see item 16.7)	2	$\mathfrak{2}% {T}=\mathfrak{2}{T}!\left( a,b\right) ,\ \mathfrak{2}{T}=\mathfrak{2}{T}!\left( a,b\right) ,$
1.5	Profit (loss) from ordinary activities before tax	(1,172)	572
1.6	Income tax on ordinary activities (see note 4)
1.7	Profit (loss) from ordinary activities after tax	(1, 172)	572
1.8	Profit (loss) from extraordinary items after tax (see item $2.5$ )
1.9	Net profit (loss)	(1, 172)	572
1.10	Net profit (loss) attributable to outside $+$ equity interests
1.11	Net profit (loss) for the period attributable to members	(1, 172)	572
	Non-owner transaction changes in equity
1.12 1.13 1.14	Increase (decrease) in revaluation reserves Net exchange differences recognised in equity Other revenue, expense and initial adjustments recognised directly in equity (attach details)
1.15	Initial adjustments from UIG transitional provisions
1.16	Total transactions and adjustments recognised
1.17	directly in equity (items 1.12 to 1.15) Total changes in equity not resulting from	(1, 172)	572
	transactions with owners as owners

Condensed consolidated statement of financial performance

Earnings per security (EPS)	Current period	Previous corresponding Period
1.18 Basic EPS	(1.52e)	$0.75\epsilon$
Diluted EPS 1.19	(1.52e)	$0.73$ ¢

⁺ See chapter 19 for defined terms.

Notes to the condensed consolidated statement of financial performance

Profit (loss) from ordinary activities attributable to members

		Current period - \$A'000	Previous corresponding period - SA'000
1.20	Profit (loss) from ordinary activities after tax (item 1.7)	(1,172)	572
1.21	Less (plus) outside $+$ equity interests
1.22	Profit (loss) from ordinary activities after tax, attributable to members	(1,172)	572

Revenue and expenses from ordinary activities

(see note $15$ )

		Current period - \$A'000	Previous corresponding period - \$A'000
1.23	Revenue from sales or services: Rendering of services Share of Joint Venture rendering of services	7618	6025 144
1.24	Interest revenue	176	212
1.25	Other relevant revenue
1.26	Details of relevant expenses: Material & Subcontractor expenses Employee benefit expense Depreciation & Amortisation expense Borrowing Costs Occupancy expenses Other Expenses from Ordinary Activities	(5,922) (2,125) (170) (2) (122) (625)	(3, 453) (1,694) (121) (2) (101) (438)
1.27	Depreciation and amortisation excluding amortisation of intangibles (see item 2.3)	(137)	(94)
1.28	Capitalised outlays Interest costs capitalised in asset values
1.29	Outlays capitalised in intangibles (unless arising from an $\pm$ acquisition of a business)

Consolidated retained profits

		Current period - SA'000	Previous corresponding period - $$A'000$
1.30	Retained profits (accumulated losses) at the beginning of the financial period	(14,067)	(14,920)
1.31	Net profit (loss) attributable to members (item ) 1.11)	(1.172)	572

⁺ See chapter 19 for defined terms.

1.32	Net transfers from (to) reserves (details if material )
1.33	Net effect of changes in accounting policies
1.34	Dividends and other equity distributions paid or payable		(230)
1.35	Retained profits (accumulated losses) at end of financial period	(15,239)	(14,578)

Intangible and extraordinary items

		Consolidated - current period
		Before tax \$A'000	Related tax \$A'000	Related outside $+$ equity interests	Amount (after $\tan$ ) attributable to members
		(a)	(b)	\$A'000(c)	\$A'000(d)
2.1	Amortisation of goodwill	5			5
$2.2^{\circ}$	Amortisation of other intangibles	28			28
2.3	Total amortisation of intangibles	33			33
2.4	Extraordinary items (details)
2.5	Total extraordinary items

Comparison of half year profits

(Preliminary final report only)

• $3.1$ Consolidated profit (loss) from ordinary activities after tax attributable to members reported for the $1st$ half year (item $1.22$ in the half yearly report)
• $3.2$ Consolidated profit (loss) from ordinary activities after tax attributable to members for the 2nd half year

Current year - \$A'000	Previous year - \$A'000
(1, 172)	572

$+$ See chapter 19 for defined terms.

	Condensed consolidated statement of financial position	end Αt оf current period \$A'000	As shown in last annual report \$A'000	As in last half yearly report \$A'000
	Current assets
4.1	Cash	7,155	8,642	8,675
4.2	Receivables	3,344	8,206	4,350
4.3	Investments
4.4	Inventories	872	137	46
4.5	Tax assets
4.6	Other (provide details if material)
4.7	Total current assets	11,371	16,985	13,071
4.8	Non-current assets Receivables	198	218	273
4.9	Investments (equity accounted)
4.10	Other investments
4.11	Inventories
4.12	Exploration and evaluation expenditure capitalised (see para .71 of AASB 1022)
4.13	properties $($ + mining Development entities)
4.14	Other property, plant and equipment (net)	646	681	454
4.15	Intangibles (net)	1,686	1,720	1,757
4.16	Tax assets
4.17	Other (provide details if material)
4.18	Total non-current assets	2,530	2,619	2,484
4.19	Total assets	13,901	19,604	15,555
	Current liabilities
4.20	Payables	2,271	6,590	3,245
4.21	Interest bearing liabilities		26
4.22	Tax liabilities			L,
4.23	Provisions exc. tax liabilities	435	625	642
4.24	Other (provide details if material)		$\overline{\phantom{0}}$
4.25	Total current liabilities	2,706	7,241	3,887
	Non-current liabilities
4.26	Payables
4.27	Interest bearing liabilities	4	7	17
4.28	Tax liabilities
4.29	Provisions exc. tax liabilities
4.30	Other (provide details if material)
4.31	Total non-current liabilities	4	7	17

Condensed consolidated statement of financial position continued

⁺ See chapter 19 for defined terms.

4.32	Total liabilities	2,710	7,248	3,904
4.33	Net assets	11,191	12,356	11,651
	Equity
4.34	Capital/contributed equity	23,254	23,247	23,053
4.35	Reserves	3,176	3,176	3,176
4.36	Retained profits (accumulated losses)	(15,239)	(14,067)	(14, 578)
4.37	Equity attributable to members of the	11,191	12,356	11,651
	parent entity
4.38	Outside + equity interests in controlled
	entities
4.39	Total equity	11,191	12,356	11,651
4.40	Preference capital included as part of
	4.37

Notes to the condensed consolidated statement of financial position

Exploration and evaluation expenditure capitalised

(To be completed only by entities with mining interests if amounts are material. Include all expenditure incurred.)

		Current period \$A'000	Previous
			corresponding period -
			SA'000
5.1	Opening balance	N/A	N/A
5.2	Expenditure incurred during current period
5.3	Expenditure written off during current period
5.4	Acquisitions, disposals, revaluation increments, etc.
5.5	Expenditure transferred to Development Properties
5.6	Closing balance as shown in the consolidated balance sheet ( item 4.12 )	NIL	NIL

Development properties

(To be completed only by entities with mining interests if amounts are material)

		Current period \$A'000	Previous
			corresponding
			period - \$A'000
6.1	Opening balance	N/A	N/A
6.2	Expenditure incurred during current period
6.3	Expenditure transferred from exploration and evaluation
6.4	Expenditure written off during current period

⁺ See chapter 19 for defined terms.

Acquisitions, disposals, revaluation
increments, etc.
Expenditure transferred to mine properties

$6.7$ Closing balance as shown in the consolidated balance sheet (item 4.13)

NIL	NIL

Condensed consolidated statement of cash flows

		Current period	Previous
		\$A'000	corresponding period
			$-$ \$A $'000$
	Cash flows related to operating activities
7.1	Receipts from customers	12,466	5,155
7.2	Payments to suppliers and employees	(14,055)	(7,626)
7.3	Dividends received from associates
7.4	Other dividends received
7.5	Interest and other items of similar nature received	176	213
7.6	Interest and other costs of finance paid	(2)
7.7	Income taxes paid
7.8	Other (provide details if material)
7.9	Net operating cash flows	(1, 415)	(2,260)
	Cash flows related to investing activities
7.10	Payment for purchases of property, plant and equipment	(102)	(89)
7.11	Proceeds from sale of property, plant and equipment
7.12	Payment for purchases of equity investments
7.13	Proceeds from sale of equity investments
7.14	Loans to other entities		(119)
7.15	Loans repaid by other entities	35
7.16	Other (provide details if material)		(50)
7.17		(67)	(258)
	Net investing cash flows
	Cash flows related to financing activities
7.18	Proceeds from issues of + securities (shares, options, etc.)	7	177
7.19	Proceeds from borrowings
7.20	Repayment of borrowings	(12)
7.21	Dividends paid		(379) (12)
7.22	Other (provide details if material)
7.23	Net financing cash flows	(5)	(214)
7.24	Net increase (decrease) in cash held	(1,487)	(2,732)
7.25	Cash at beginning of period	8642	11,407
	(see Reconciliation of cash)
7.26	Exchange rate adjustments to item 7.25.

• See chapter 19 for defined terms.

$7.27$ Cash at end of period

(see Reconciliation of cash)

7.155	8,675
-------	-------

Non-cash financing and investing activities

Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows are as follows. (If an amount is quantified, show comparative amount.)

Reconciliation of cash

Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.		Current period \$A'000	Previous corresponding period - \$A'000
8.1	Cash on hand and at bank	7.155	8,675
8.2	Deposits at call
8.3	Bank overdraft
8.4	Other (provide details)
8.5	Total cash at end of period (item 7.27)	7,155	8,675

Other notes to the condensed financial statements

Ratios		Current period	Previous corresponding period
9.1	Profit before tax / revenue Consolidated profit (loss) from ordinary activities before tax (item $1.5$ ) as a percentage of revenue (item 1.1)	$(15.03\%)$	8.97%
9.2	Profit after tax $/$ + equity interests Consolidated net profit (loss) from ordinary activities after tax attributable to members ( item 1.11 ) as a percentage of equity (similarly attributable) at the end of the period (item (4.37)	$(10.47\%)$	4.81%

Earnings per security (EPS)

1. Details of basic and diluted EPS reported separately in accordance with paragraph 9 and 18 of AASB 1027: Earnings Per Share are as follows.

Refer Accompanying Schedule

⁺ See chapter 19 for defined terms.

NTA backing (see note 7)	Current period	Previous corresponding period
11.1 Net tangible asset backing per + ordinary security	\$0.123	\$0.13

Discontinuing Operations

(Entities must report a description of any significant activities or events relating to discontinuing operations in accordance
with paragraph 7.5 (g) of AASB 1029: Interim Financial Reporting, or, the details of discontin disclosed in their accounts in accordance with AASB 1042: Discontinuing Operations (see note 17).)

12.1	Discontinuing Operations
	$\mathrm{N}/\mathrm{A}$

Control gained over entities having material effect

13.1	Name of entity (or group of entities)		N/A
13.2	Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) since the date in the current period on which control was + acquired		\$
13.3	Date from which such profit has been calculated
13.4	Profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period		\$

⁺ See chapter 19 for defined terms.

NIL¢

$NIL \epsilon$

NILe

NIL¢

Loss of control of entities having material effect

14.1	Name of entity (or group of entities)		N/A
14.2	Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) for the current period to the date of loss of control		S
14.3	Date to which the profit (loss) in item 14.2 has been calculated
14.4	Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) while controlled during the whole of the previous corresponding period		S
14.5	Contribution to consolidated profit (loss) from ordinary activities and extraordinary items from sale of interest leading to loss of control		\$
	Dividends (in the case of a trust, distributions)
15.1	Date the dividend (distribution) is payable		N/A

• $15.2$ ⁺Record date to determine entitlements to the dividend (distribution) (ie, on the basis of proper instruments of transfer received by 5.00 pm if ⁺securities are not ⁺CHESS approved, or security holding balances established by 5.00 pm or such later time permitted by SCH Business Rules if $\dot{\tau}$ securities are ⁺CHESS approved)
• $15.3$ If it is a final dividend, has it been declared? (Preliminary final report only)

		Amount per security	Franked amount per security at % tax (see note
15.4	(Preliminary final report only) Final dividend: Current year	NILe	NILe-
15.5	Previous year	NILe	NIL é

Amount per security

Total dividend (distribution) per security (interim plus final)

(Half vearly and preliminary final reports)

Interim dividend: Current year

(Preliminary final report only)

Previous year

15.6

15.7

$N/A$

$NIL@$

NILe

$NIL \epsilon$

$0.3_e$

Amount per security of foreign source dividend

⁺ See chapter 19 for defined terms.

		Current year	Previous year
-15.8	+ Ordinary securities	$NIL \notin$	0.3e
-15.9	Preference + securities	-C	-C

Half yearly report - interim dividend (distribution) on all securities or Preliminary final report - final dividend (distribution) on all securities

		Current period \$A'000	Previous corresponding period - \$A'000
15.10	$\overrightarrow{b}$ Ordinary securities (each class separately)	NIL	229,758
15.11	Preference + securities (each class) separately)
15.12	Other equity instruments (each class separately)
15.13	Total	NIL.	229.758

The $\overrightarrow{ }$ dividend or distribution plans shown below are in operation.

NONE

The last date(s) for receipt of election notices for the

⁺dividend or distribution plans

Any other disclosures in relation to dividends (distributions). (For half yearly reports, provide details in accordance with paragraph 7.5(d) of AASB 1029 Interim Financial Reporting)

NONE

Details of aggregate share of profits (losses) of associates and joint venture entities

entities':	Group's share of associates' and joint venture	Current period \$A'000	Previous corresponding period $-$ \$A'000
16.1	Profit (loss) from ordinary activities before tax	N/A	N/A
16.2	Income tax on ordinary activities	N/A	N/A
16.3	Profit (loss) from ordinary activities after tax	N/A	N/A
16.4	Extraordinary items net of tax	N/A	N/A
16.5	Net profit (loss)	N/A	N/A

⁺ See chapter 19 for defined terms.

16.6	Adjustments
16.7	Share of net profit (loss) of associates and joint venture entities

Material interests in entities which are not controlled entities

The economic entity has an interest (that is material to it) in the following entities. (If the interest was acquired or disposed of during either the current or previous corresponding period, indicate date of acquisition ("from dd/mm/yy") or disposal ("to dd/mm/yy").)

	Name of entity	Percentage of ownership		Contribution to net profit (loss) (item
			interest held at end of period or	1.9
		date of disposal
17.1	Equity accounted associates and joint venture entities	Current period	Previous corresponding period	Current period \$A'000	Previous corresponding period- \$A'000
		N/A	N/A	N/A	N/A
17.2	Total
17.3	Other material interests	N/A	N/A	N/A	N/A
17.4	Total

Issued and quoted securities at end of current period

(Description must include rate of interest and any redemption or conversion rights together with prices and dates)

	Category of + securities	Total number	Number quoted	ssue price - per security (see note 14) (cents)	Amount paid up per security (see note $14)$ (cents)
18.1	Preference + securities (description)	N/A
18.2	Changes during current period (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions

⁺ See chapter 19 for defined terms.

18.3	+ Ordinary securities	77,097,512	77,072,512
18.4	Changes during current period (a) Increases through issues (b) Decreases through returns of capital, buybacks	25,000		0.30	0.30
18.5	+ Convertible debt securities (description and conversion factor)
18.6	Changes during current period (a) Increases through issues (b) Decreases through securities matured, converted
18.7	Options (description and conversion factor)	Refer Accompanying Schedule		Exercise price	Expiry date (if any)
18.8	Issued during current period
18.9	Exercised during current period
18.10	Expired during current period
18.11	Debentures (description)
18.12	Changes during current period (a) Increases through issues
	(b) Decreases through securities matured, converted
18.13	Unsecured notes (description)
18.14	Changes during current period
	(a) Increases through issues
	(b) Decreases through securities matured, converted

Segment reporting

(Information on the business and geographical segments of the entity must be reported for the current period in accordance with AASB 1005: Segment Reporting and for half year reports, AASB 1029: Interim Financial Reporting. Because entities employ different structures a pro forma cannot be provided. Segment information in the layout employed in the entity's $\dot{\tau}$ accounts should be reported separately and attached to this report.)

REFER ACCOMPANYING SCHEDULE

⁺ See chapter 19 for defined terms.

Comments by directors

(Comments on the following matters are required by ASX or, in relation to the half yearly report, by AASB 1029: Interim Financial Reporting. The comments do not take the place of the directors' report and statement (as required by the Corporations Act) and may be incorporated into the directors' report and statement. For both half yearly and preliminary final reports, if there are no comments in a section, state NIL. If there is insufficient space to comment, attach notes to this report.)

Basis of financial report preparation

• If this report is a half vearly report, it is a general purpose financial report prepared in accordance with $19.1$ the listing rules and AASB 1029: Interim Financial Reporting. It should be read in conjunction with the last ⁺annual report and any announcements to the market made by the entity during the period. The financial statements in this report are "condensed financial statements" as defined in AASB 1029: Interim Financial Reporting. This report does not include all the notes of the type normally included in an annual financial report. [Delete if preliminary final report.]
• $19.2$ Material factors affecting the revenues and expenses of the economic entity for the current period. In a half yearly report, provide explanatory comments about any seasonal or irregular factors affecting operations.

REFER TO ACCOMPANYING ANNEXURE "B"

$19.3$ A description of each event since the end of the current period which has had a material effect and which is not already reported elsewhere in this Appendix or in attachments, with financial effect quantified (if possible).

NONE

$19.4$ Franking credits available and prospects for paying fully or partly franked dividends for at least the next year.

NIL.

$19.5$ Unless disclosed below, the accounting policies, estimation methods and measurement bases used in this report are the same as those used in the last annual report. Any changes in accounting policies, estimation methods and measurement bases since the last annual report are disclosed as follows. (Disclose changes and differences in the half yearly report in accordance with AASB 1029: Interim Financial Reporting. Disclose changes in accounting policies in the preliminary final report in accordance with $AASB$ 1001: Accounting Policies-Disclosure).

⁺ See chapter 19 for defined terms.

$N/A$

NONE

19.6 Revisions in estimates of amounts reported in previous interim periods. For half yearly reports the nature and amount of revisions in estimates of amounts reported in previous +annual reports if those revisions have a material effect in this half year.

NIL

$19.7$ Changes in contingent liabilities or assets. For half yearly reports, changes in contingent liabilities and contingent assets since the last * annual report.

NIL

Additional disclosure for trusts

20.1 Number of units held by the management company or responsible entity or their related parties.	N/A
--------------------------------------------------------------------------------------------------------------	-----

20.2 A statement of the fees and commissions payable to the management company or responsible entity.

Identify:

• initial service charges ٠
• management fees
• other fees

(Preliminary final report only)

The annual meeting will be held as follows: Place	$\rm N/A$
Date
Time

⁺ See chapter 19 for defined terms.

Approximate date the "annual report will be available

Compliance statement

$\mathbf{1}$ This report has been prepared in accordance with AASB Standards, other AASB authoritative pronouncements and Urgent Issues Group Consensus Views or other standards acceptable to ASX (see note 12).

Identify other standards used

• $\overline{2}$ This report, and the "accounts upon which the report is based (if separate), use the same accounting policies.
• 3 This report does give a true and fair view of the matters disclosed (see note 2).
• $\overline{4}$ This report is based on ⁺accounts to which one of the following applies. $(Tick one)$ П

		а

The $\alpha$ accounts have been $\Box$ audited.	The Taccounts have been subject to review.
The * accounts are in the process of being audited or subject to review.	The * accounts have not yet been audited or reviewed.

• 5 If the audit report or review by the auditor is not attached, details of any qualifications are attached/will follow immediately they are available* (delete one). (Half yearly report only the audit report or review by the auditor must be attached to this report if this report is to satisfy the requirements of the Corporations Act.)
• The entity does not have* a formally constituted audit committee. 6

Sign here: Date: .................................... ...................................... (Director/Company Secretary)

Print name: PETER A HOPPS

⁺ See chapter 19 for defined terms.

Notes

• $\mathbf{1}$ . For announcement to the market The percentage changes referred to in this section are the percentage changes calculated by comparing the current period's figures with those for the previous corresponding period. Do not show percentage changes if the change is from profit to loss or loss to profit, but still show whether the change was up or down. If changes in accounting policies or procedures have had a material effect on reported figures, do not show either directional or percentage changes in profits. Explain the reason for the omissions in the note at the end of the announcement section. Entities are encouraged to attach notes or fuller explanations of any significant changes to any of the items in page 1. The area at the end of the announcement section can be used to provide a cross reference to any such attachment.
• $\mathcal{D}$ True and fair view If this report does not give a true and fair view of a matter (for example, because compliance with an Accounting Standard is required) the entity must attach a note providing additional information and explanations to give a true and fair view.

3. Condensed consolidated statement of financial performance

• The definition of "revenue" and an explanation of "ordinary activities" are set Item 11 out in AASB 1004: Revenue, and AASB 1018: Statement of Financial Performance.
• Item 1.6 This item refers to the total tax attributable to the amount shown in item 1.5. Tax includes income tax and capital gains tax (if any) but excludes taxes treated as expenses from ordinary activities (eg, fringe benefits tax).
• $\overline{4}$ Income tax If the amount provided for income tax in this report differs (or would differ but for compensatory items) by more than 15% from the amount of income tax prima facie pavable on the profit before tax, the entity must explain in a note the major items responsible for the difference and their amounts. The rate of tax applicable to the franking amount per dividend should be inserted in the heading for the column "Franked amount per security at % $\text{tax}"$ for items 15.4 to 15.7.

5. Condensed consolidated statement of financial position

Format The format of the consolidated statement of financial position should be followed as closely as possible. However, additional items may be added if greater clarity of exposition will be achieved, provided the disclosure still meets the requirements of AASB 1029: Interim Financial Reporting, and AASB 1040: Statement of Financial Position. Also, banking institutions, trusts and financial institutions may substitute a clear liquidity ranking for the Current/Non-Current classification.

Basis of revaluation If there has been a material revaluation of non-current assets (including investments) since the last ⁺annual report, the entity must describe the basis of revaluation adopted. The description must meet the requirements of AASB 1010: Accounting for the Revaluation of Non-Current Assets. If the entity has adopted a procedure of regular revaluation, the basis for which has been disclosed and has not changed, no additional disclosure is required.

Condensed consolidated statement of cash flows For definitions of "cash" and other terms 6. used in this report see AASB 1026: Statement of Cash Flows. Entities should follow the form as closely as possible, but variations are permitted if the directors (in the case of a trust, the management company) believe that this presentation is inappropriate. However, the

⁺ See chapter 19 for defined terms.

presentation adopted must meet the requirements of $AASB$ 1026. ^$+$ Mining exploration entities may use the form of cash flow statement in Appendix 5B.

• $7.$ Net tangible asset backing Net tangible assets are determined by deducting from total tangible assets all claims on those assets ranking ahead of the $+$ ordinary securities (ie, all liabilities, preference shares, outside $+$ equity interests etc). $+$ Mining entities are not required to state a net tangible asset backing per $+$ ordinary security.
• 1. Gain and loss of control over entities The gain or loss must be disclosed if it has a material effect on the ⁺accounts. Details must include the contribution for each gain or loss that increased or decreased the entity's consolidated profit (loss) from ordinary activities and extraordinary items after tax by more than 5% compared to the previous corresponding period.
• $\mathbf{Q}$ Rounding of figures This report anticipates that the information required is given to the nearest \$1,000. If an entity reports exact figures, the \$A'000 headings must be amended. If an entity qualifies under ASIC Class Order 98/0100 dated 10 July 1998, it may report to the nearest million dollars, or to the nearest \$100,000, and the \$A'000 headings must be amended.
• $10¹$ Comparative figures Comparative figures are to be presented in accordance with AASB 1018 or AASB 1029 Interim Financial Reporting as appropriate and are the unadjusted figures from the latest annual or half year report as appropriate. However, if an adjustment has been made in accordance with an accounting standard or other reason or if there is a lack of comparability, a note explaining the position should be attached. For the statement of financial performance, AASB 1029 Interim Financial Reporting requires information on a year to date basis in addition to the current interim period. Normally an Appendix 4B to which AASB 1029 Interim Financial Reporting applies would be for the half year and consequently the information in the current period is also the year to date. If an Appendix 4B Half yearly version is produced for an additional interim period (eg because of a change of reporting period), the entity must provide the year to date information and comparatives required by AASB 1029 Interim Financial Reporting. This should be in the form of a multi-column version of the consolidated statement of financial performance as an attachment to the additional Appendix 4B.
• $11₁$ Additional information An entity may disclose additional information about any matter, and must do so if the information is material to an understanding of the reports. The information may be an expansion of the material contained in this report, or contained in a note attached to the report. The requirement under the listing rules for an entity to complete this report does not prevent the entity issuing reports more frequently. Additional material lodged with the ^$+$ ASIC under the Corporations Act must also be given to ASX. For example, a director's report and declaration, if lodged with the $\pm$ ASIC, must be given to ASX.
• Accounting Standards ASX will accept, for example, the use of International Accounting $12.$ Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if one exists) must be complied with.
• 1. Corporations Act financial statements This report may be able to be used by an entity required to comply with the Corporations Act as part of its half-year financial statements if prepared in accordance with Australian Accounting Standards.
• $14.$ Issued and quoted securities The issue price and amount paid up is not required in items 18.1 and 18.3 for fully paid securities.

⁺ See chapter 19 for defined terms.

15 Details of expenses AASB 1018 requires disclosure of expenses from ordinary activities according to either their nature or function. For foreign entities, there are similar requirements in other accounting standards accepted by ASX. AASB ED 105 clarifies that the disclosures required by AASB 1018 must be either all according to nature or all according to function. Entities must disclose details of expenses using the layout (by nature or function) employed in their $+$ accounts

The information in lines 1.23 to 1.27 may be provided in an attachment to Appendix 4B.

Relevant Items AASB 1018 requires the separate disclosure of specific revenues and expenses which are not extraordinary but which are of a size, nature or incidence that disclosure is relevant in explaining the financial performance of the reporting entity. The term "relevance" is defined in $AASB$ 1018. There is an equivalent requirement in $AASB$ 1029: Interim Financial Reporting. For foreign entities, there are similar requirements in other accounting standards accepted by ASX.

16 Dollars If reporting is not in A\$, all references to \$A must be changed to the reporting currency. If reporting is not in thousands of dollars, all references to "000" must be changed to the reporting value.

17. Discontinuing operations

Half yearly report

All entities must provide the information required in paragraph 12 for half years beginning on or after 1 July 2001.

Preliminary final report

Entities must either provide a description of any significant activities or events relating to discontinuing operations equivalent to that required by paragraph 7.5 (g) of $AASB 1029$ . Interim Financial Reporting, or, the details of discontinuing operations they are required to disclose in their ⁺accounts in accordance with AASB 1042 Discontinuing Operations.

In any case the information may be provided as an attachment to this Appendix 4B.

18. Format

This form is a Word document but an entity can re-format the document into Excel or similar applications for submission to the Companies Announcements Office in ASX.

⁺ See chapter 19 for defined terms.

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD ANNEXURE "A"

$18.7$ Options

	Expiring 30 November 2004 exercisable at 45 cents Expiring 7 September 2005 exercisable at 32 cents Expiring 30 November 2005 exercisable at 40 cents Expiring 19 March 2004 exercisable at 65 cents Expiring 20 Mach 2004 exercisable at 75 cents Expiring 30 November 2005 exercisable at 40 cents	500,000 2,248,000 1,413,750 1,297,500 1,297,500 100,000
			6,856,750
18.8	Issued During the Current Period
			Nil
18.9	Exercised During the Current Period
			Nil
	18.10 Expired During the Current Period
	Expired 26 November 2002 exercisable at 40 cents Expired 25 November 2002 exercisable at 30 cents	300,000 200,000	500.000

⁺ See chapter 19 for defined terms.

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD

SEGMENT INFORMATION

The consolidated entity operates predominantly in Australia and in the Water and Wastewater industry. The nature of this activity comprises the design, construction, commissioning and operation of Water and Wastewater Treatment Plants. These activities are generally undertaken in accordance with contracts awarded to the entity by its customers.

⁺ See chapter 19 for defined terms.

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD ANNEXURE "B"

Earnings per security (EPS)

	Consolidated
	31/12/2003 Cents Per Share	30/6/2002 Cents Per Share
Earnings Per Share
Basic earnings per share	(1.52)	1.72
Diluted earnings per share	(1.52)	1.68
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:	31/12/2003 \$'000's	2002 \$'000's
Earnings (a)	(1, 172)	1,314
	31/12/2003 No.	2002 No.
Weighted average number or ordinary shares (b)	77,088,816	76,498,620
(a) Earnings used in the calculation of basic earnings per share reconciles to net profit in the statement of financial performance as follows:	31/12/2003 \$'000's	2002 \$'000's
Net Profit/(Loss) Earnings used in the calculation of basic EPS	(1, 172) (1, 172)	1,314 1,314
(b) Unlisted options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share (see below).
Diluted Earnings Per Share The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows:
Earnings (a)	31/12/2003 \$'000's (1, 172)	2002 \$'000's 1,314
Weighted average number of ordinary shares and potential ordinary shares (b), (c)	31/12/2003 No. 77,088,816	2002 No. 78,329,894

(a) Earnings used in the calculation of diluted earnings per share reconciles to net profit in the statement of financial performance as follows:

⁺ See chapter 19 for defined terms.

31/12/2003 \$'000's (1, 172) (1, 172) 31/12/2003	2002 \$'000's 1,314 1,314
No.	2002 No.
77,088,816	76,495,109
	1,831,274
77,088,816	78,326,383
	2002 No.
	109,580
	2,595,000
	31/12/2003 No. 7,356,750

Appendix 4B
Half yearly/preliminary final report

ENVIRONMENTAL SOLUTOINS INTERNATIONAL LTD DIRECTORS' REPORT

The Directors submit herewith the Financial Report for the half-year ended 31 December 2002. In order to comply with the provisions of the Corporations Act, the Directors report as follows:

DIRECTORS

The names and particulars of the Directors of the controlling entity in office at the date of this Report are:

Name Terence Edward O'Connor O.C.	Particulars Chairman, Non-Executive Director, Chancellor of the University of Notre Dame Australia, Chairman of Ausdrill Ltd, Director of Elkington Bishop Molineaux Insurance Brokers Ltd, Director of GES International Ltd and Chairman of the Western Australian Anti Corruption Commission.
Denis Patrick Glennon AO, B.A. (Hons), M.Sc., FIDA	Managing Director. Mr Glennon has extensive experience in business development, technology commercialisation and environmental regulations.
Dennis Hamilton O'Neill B.Sc. (Hons) - Mech. Eng.	Non-Executive Director. Mr O'Neill is former Managing Director and Chief Executive of United Group and former Managing Director of Evans Deakins Industries Ltd. He has extensive experience in engineering and in the export of Australian expertise and technologies.
John Boon-Heng Cheak B.Econ. (UWA)	Non-Executive Director. Mr Cheak is Executive Director of Chuan Hup Holdings Ltd, a public listed company in Singapore and director of companies within the Chuan Hup Group, including Cleanway Environmental Services (a company carrying on waste treatment service), Finbar International Ltd and Zicom Australia Limited. He has extensive experience in sales, marketing, investment and venture management in Asia and Australia.

REVIEW OF OPERATIONS

During the half-year, the development and commercialisation of waste treatment technologies continued.

ROUNDING OFF OF AMOUNTS

The Company is a company of the kind referred to in ASIC Class order 98/0100 dated 10 July 1998 and in accordance with that Class order amounts in the Directors' report and the financial report have been rounded off to the nearest thousand dollars.

Signed in accordance with a resolution of the directors.

On behalf of the Directors

Mr D P Glennon AO Managing Director Perth 20 February 2003

⁺ See chapter 19 for defined terms.

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD

DIRECTORS' DECLARATION FOR THE FINANCIAL HALF-YEAR ENDED 31 DECEMBER 2002

The Directors declare that:

• $(a)$ The attached financial statements and notes thereto comply with accounting standards:
• $(b)$ The attached financial statements and notes thereto give a true and fair view of the financial position and performance of the consolidated entity:
• $(c)$ In the Directors' opinion the attached financial statements and notes thereto are in accordance with the Corporations Act 2001; and
• $(d)$ In the Directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors made pursuant to section 305(5) of the Corporations Act 2001.

For and on behalf of the Board

D P Glennon AO Managing Director

Perth 20 February 2003

⁺ See chapter 19 for defined terms.

Review of Half Year Report, Consolidated, ASX Appendix 4B INDEPENDENT REVIEW REPORT TO THE MEMBERS OF ENVIRONMENTAL SOLUTIONS INTERNATIONAL LIMITED

Scope

We have reviewed the attached financial report of Environmental Solutions International Limited in the form of Appendix 4B of the Australian Stock Exchange (ASX) Listing Rules, including the directors' declaration, for the half-year ended 31 December 2002, but excluding the following sections:

• material factors affecting the revenues and expenses of the consolidated entity for the current period (page a) $(4)$ ; and
• $b)$ compliance statement (page 16).

The financial report includes the consolidated financial statements of the consolidated entity comprising the disclosing entity and the entities it controlled at the end of the halfvear or from time to time during the half-year. The disclosing entity's directors are responsible for the financial report. We have performed an independent review of the financial report in order to state whether, on the basis of the procedures described. anything has come to our attention that would indicate that the financial report is not presented fairly in accordance with Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory professional reporting requirements in Australia, statutory requirements and ASX Listing Rules as they relate to Appendix 4B, so as to present a view which is consistent with our understanding of the consolidated entity's financial position, and performance as represented by the results of its operations and its cash flows, and in order for the disclosing entity to meet its obligations to lodge the financial report with the Australian Securities and Investments Commission and the ASX.

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. A review is limited primarily to inquiries of the entity's personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Statement

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Environmental Solutions International Limited is not in accordance with:

• the Corporations Act 2001, including: $(a)$
• giving a true and fair view of the consolidated entity's financial position as at 31 December 2002 and $(i)$ of its performance for the half-year ended on that date; and
• complying with Accounting Standard AASB 1029 "Interim Financial Reporting" and the $(ii)$ Corporations Regulations 2001: and
• $(b)$ other mandatory professional reporting requirements in Australia and ASX Listing Rules as they relate to Appendix 4B.

DELOITTE TOUCHE TOHMATSU

P.I McIVER Partner Chartered Accountants Perth, 20 February 2003

⁺ See chapter 19 for defined terms.